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What is a Supplemental Needs Trust in New Jersey?

Last updated on: June 20, 2024

Planning for the future when caring for a loved one with special needs involves a delicate balance of providing support while maintaining their access to essential government benefits. In New Jersey, a Supplemental Needs Trust offers a way to enhance the quality of life for individuals with disabilities. This trust serves as a financial bridge that extends beyond the limitations of public assistance, ensuring that additional care and resources are available without compromising the beneficiary’s eligibility for programs like Medicaid or Supplemental Security Income (SSI).

Understanding the intricacies of a Supplemental Needs Trust is crucial, as the implications of such a legal arrangement can profoundly impact your loved one’s future. For those in New Jersey seeking to set up a trust, the guidance of a seasoned special needs trust attorney is crucial. At The Matus Law Group, our team of New Jersey special needs trust lawyers may help you navigate the legal landscape confidently, creating a trust customized to your family’s unique needs. Contact us today at (732) 785-4453 to schedule a consultation.

What Is A Special Needs Trust?

Under the New Jersey Medicaid program, a “Supplemental Needs Trust” or “Special Needs Trust” (SNT) is a trust created for the sole benefit of a disabled person before the age of 65. Its purpose is to allow beneficiaries to supplement their income without affecting their eligibility to receive disability assistance received from local, state, or federal government agencies, mainly Medicaid and/or Supplementary Social Security (SSI). An SNT can be established by the disabled individual’s parent, grandparent, legal guardian, or by the court. There are Special Needs Trust attorneys who specialize in helping clients secure SNTs for their disabled family members.

What Are The Conditions Of A Special Needs Trust?

Under the laws of New Jersey, an SNT must meet specific criteria. This includes, but not limited to the following:

  • Trust has to contain the assets of an individual, including gifts.
  • All deposits made to the trust must be done before the beneficiary turns 65
  • The beneficiary must be disabled as defined by 42 U.S.C. 1382c(a)(3)
  • The trust can only be for the sole benefit of its beneficiary.
  • The New Jersey Medicaid program must be fully reimbursed for all the Medicaid payments received during the beneficiary’s lifetime.
Conditions of a Special Needs Trust Description
Trust Assets Assets, including gifts, must be contained within the trust.
Deposits All deposits must be made before the beneficiary turns 65.
Beneficiary Disability The beneficiary must be disabled as defined by 42 U.S.C. 1382c(a)(3).
Sole Benefit The trust can only be for the sole benefit of its beneficiary.
Medicaid Reimbursement The New Jersey Medicaid program must be fully reimbursed for all Medicaid payments received.

Are There Any Disadvantages Of A Special Needs Trust?

As is the case with arriving at a solution, no option is perfect. SNTs do present circumstances which should be carefully considered before being pursued. First, control of the trust lies squarely with the trustee and not the beneficiary. This will limit the beneficiary’s independence and they will have to rely on the trustee. Second, when the beneficiary dies, Medicaid must be fully repaid for the monetary assistance provided, which for most people, means the trust’s funds will be completely depleted. Finally, the cost of setting an SNT isn’t cheap and involves significant recurring fees.

Still, given what’s at stake, the advantages of an SNT, will in most cases, outweigh the drawbacks. Furthermore, the one thing that these trusts provide which cannot be denied is peace of mind. Knowing that your disabled loved one will be taken care of regardless of what happens to you, is in itself enough reason to seriously consider creating an SNT.

Choosing a Trustee for a Special Needs Trust

The most important things to look for in a Supplemental Needs Trust or Special Needs Trust (SNT) trustee are that they should be trustworthy and intelligent. They should also be able to maintain good records and take their responsibilities seriously. Matus Law Group has a team of experienced attorneys who may be able to help trustees properly manage the SNT.  The responsibilities of being a trustee for SNT are very serious. If the trustee fails to properly administer the SNT, beneficiaries may lose their benefits or have to repay the government.

A Supplemental Needs Trust trustee must have great discretion. Keep in mind, that if a spouse or a beneficiary is named as the trustee, means-tested benefits may be jeopardized. On the other hand, as long as parents, children, and others are trustworthy and can manage finances, they could be good trustees.

Although a Special Needs Trust trustee can charge a fee, family members may waive this. The trustee may also hire accountants, lawyers, financial advisors, and other professionals on the trust’s behalf. A bank, lawyer, or any other professional may be the best choice to become a trustee in certain cases, especially when there are large trusts. Sometimes, trustees are also appointed by non-profit organizations.

Management of a large Special Needs Trust is an enormous responsibility, especially for a first-party SNT. It also carries significant obligations. Trustees must be wise investors, meet tax requirements, and comply with all laws regarding Medicaid or other means-tested benefits. Busy private individuals don’t always have the expertise and time to do this task, so if you are looking for a trustee of a large trust, a professional may be a better choice.

What Happens to a Special Needs Trust When the Beneficiary Turns 65?

When a beneficiary of a Special Needs Trust (SNT) turns 65, certain rules come into play that affect the management and continuation of the trust. Trustees and beneficiaries need to understand these regulations to ensure the trust continues to serve its intended purpose without legal complications.

Firstly, any transfers into the SNT from the beneficiary’s own assets are prohibited after they reach the age of 65. This is a critical point: no additional assets from the beneficiary can be deposited into the trust once they hit this age milestone. These late contributions are considered an improper transfer of resources, and they can have negative consequences, potentially affecting the beneficiary’s eligibility for certain government benefits.

Additionally, all contributions to the trust must be completed before the beneficiary turns 65. This means that planning ahead is essential. Relatives, guardians, or the beneficiaries themselves should ensure that all intended assets are placed into the SNT well before their 65th birthday.

Work With A Top-rated Special Needs Attorney

SNTs are an effective tool for families to assist adults with disabilities to streamline their everyday living expenses and preserve vital sources of government assistance they receive. To decide whether or not an SNT is right for a member of your family, you should seek the services of a reputable Special Needs Trust attorney in New Jersey, contact Christine Matus at the Matus Law Group to schedule an appointment.

Christine Matus

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Christine Matus

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